State pension to increase by 4% from April 2020

By Marek Handzel30/09/19

State pension payments are expected to rise by four per cent from April 2020, due to an increase in earnings growth.

Aegon said that figures from the Office for National Statistics showed that earnings growth for the year to July stood at four per cent, well above the other measures used to calculate state pension increases under the UK’s 'triple lock' calculation system.

The triple lock guarantees that the state pension increases by whichever figure out of earnings growth, price inflation or 2.5 per cent, is highest over the course of the year.

Although the CPI price inflation figure for the year to September will not be announced until mid-October, Aegon does not expect any last minute surprises that would result in a figure higher than four per cent.

Inflation fell in August to 1.7 per cent, down from 2.1 per cent the previous month.

As a result, the full new state pension will rise from £168.60 a week to £175.35 a week and the full old basic state pension will increase from £129.20 a week to £134.35 a week.

Aegon pensions director, Steven Cameron said that although the increase would be welcome for current state pensioners, it would come at a significant cost.

“Based on the latest earnings growth figures, it looks like state pensioners can look forward to an inflation busting four per cent increase in their state pension from next April,” he said.

“[But] the state pension is not funded in advance so pensions are funded on a ‘pay as you go’ basis from today’s workers’ National Insurance contributions.

“With the prospect of an early general election, it will be interesting to see where each party stands on commitments to retaining the triple lock for the next five years.”

The triple lock was announced back in 2010, when a single person receiving the old basic state pension would pick up £97.65 a week in April of that year.

That same person would now be receiving £129.20 a week, an increase of 32 per cent.

Over the same period, prices have increased by 24 per cent and average earnings by only 20 per cent.